Financial Coaching. Describing the Practice ISSUE BRIEF. November By: Maggie McKenna, PhD, Bill Harper, MSW, and Dana Mills, BA

Transcription

1 ISSUE BRIEF Financial Coaching Describing the Practice November 2013 By: Maggie McKenna, PhD, Bill Harper, MSW, and Dana Mills, BA

2 Financial coaching: An empowering strategy Financial coaches offer their clients encouragement and support to initially identify their own financial goals and to take steps to reach those goals 1 that typically involve asset creation, asset management, and asset protection. Financial coaching has been demonstrated with moderate and low-income individuals to set goals and practice financial behaviors so the clients make progress toward managing their financial assets and achieving financial security. Financial coaching is a promising option that can empower low-income clients who are typically offered very little choice when they are enrolled in the systems of public benefits, unemployment, or publicly funded health care. 2 While financial coaching is becoming more widely implemented, the practice components have not been described in ways that make the field of financial coaching consistent and uniform. To better understand how financial coaching is especially relevant for empowering low-income clients, this brief explains two dimensions that are essential aspects of financial coaching practice: (1) the preparation of the financial coach and (2) and the foundation of behavior change in the client. This brief answers four related questions about the practice of financial coaching as a strategy that contributes to individuals changing their behaviors to achieve financial security: 1. Drawing on the evidence from Washington State, what have we learned about preparing financial coaches to empower clients? 2. What variations are developing in financial coaching service delivery? 3. What can we apply from behavior change theory to the practice of financial coaching? 4. What actions will advance financial coaching in different settings? Preparing Financial Coaches Developing variations in financial coaching service delivery Applying behavior change theory to the practice of Financial Coaching Advancing financial coaching in settings 1 Mangan, B., (2010) Advancing Financial Coaching for Low-Income Populations: Midstream Lessons from EARN. San Francisco: EARN White Paper. Accessed online at : 2 Ibid. 1

3 1. Preparing financial coaches for empowering client relationships The Prosperity Agenda, which is a research and policy organization in Washington State, developed and implemented the Financial Coaching for Prosperity training program. This program uses an integrated dual-focused approach of concurrently training participants in communication approaches endorsed by the International Coach Federation along with financial topics. Some training programs have assumed the financial competencies of the future financial coaches and targeted the coaching approach while other training programs have provided preliminary brief financial education that was followed by coaching techniques. The Prosperity Agenda blended the coaching and financial content into a four day training which is complemented by additional monthly follow-up sessions to reinforce application of financial coaching in service delivery. To date, more than 300 human service and financial services frontline staff members, supervisors or program managers from non-profit, for-profit, private and public agencies have completed the training. The financial topics were developed with input from the Washington Asset Building Coalition and included broad domains of asset creation, management, and protection, which were delivered in interactive sessions including using credit wisely, debt alleviation, budgeting, and tracking spending. Rigorous evaluations of the training sessions led to revisions in the duration and order of content, with the addition of case examples as well as the strengthening of followup sessions to support new coaches to use financial coaching in their practice. Asset Trio Area Asset Creation Asset Management Asset Protection Topics Income Generation Financial Goal Setting Budgeting & Tracking Spending Credit Building Behavioral Economics Banking & Cash Management Savings Credit Management Long Term Savings Investments & Retirement Planning Debt Management & Alleviation Insurance The majority of Financial Coaching for Prosperity training participants worked in housing programs or other human services. These programs could be placed on a service continuum from one-time emergency assistance or eviction prevention programs, to case management programs for adults developing their education and employment assets, to multi-year programs such as those that assist first time home owners. In most settings, clients had met the eligibility requirements to enroll in targeted programs and those programs were selected to implement financial coaching. The case managers/financial coaches for these programs variously identified that they could readily apply 2

4 financial coaching approaches with some clients, but also found that despite extended effort, other clients chose not to engage in coaching. The qualitative data collected to date have indicated that clients in the programs who participated in financial coaching for at least six months were likely to accomplish steps toward their identified goals. The results, still in progress, suggest that programs which engage clients who are not in imminent crises or risk of harm, and who are thinking of making personal changes, function more efficiently in providing the financial empowerment services to assist clients toward achieving their self-identified goals of financial resilience and asset development. Preparing financial coaches by training their supervisors to understand financial coaching The Prosperity Agenda has also identified that the implementation of financial coaching by newly trained financial coaches, who are case managers in diverse human services programs, will be best supported by also increasing the new financial coaches supervisors and program managers understanding of financial coaching. Financial coaches, as well as their supervisors, may have to shift their assumptions to view each client as creative, resourceful, and capable of making choices to reach personal fulfillment. Another shift is to accept that the effectiveness of coaching rests on the quality of the financial coachclient relationship, which involves creating trust, authenticity, and compassion in a safe environment to support the client developing increased self-awareness. 3 Financial coaches who completed training, but returned to practice as the sole financial coach in an organization which historically had only a secondary focus on clients financial security, became frustrated with the lack of understanding and support from their program supervisors. The Prosperity Agenda identified that training mid-level management, and ideally senior management as well, contributes to the acceptance and appreciation of the financial coaching paradigm of service delivery, with its focus on client-driven goals and client accountability. For example, financial coaching calls for supervisors to recognize that the case manager who is coaching clients may be spending more time in face-to-face client interactions, but the frequency of interactions may decrease when the client is more actively engaged in action steps toward a self-directed goal. The case managers who adopt financial coaching will typically be modifying their communication approaches in their client interactions to fully engage clients as the expert decision makers in their own lives. Implementation of financial coaching has more successfully occurred in settings where the clientfocused coaching paradigm aligned with the organization philosophy or mission. Procuring the buy-in and support from agency management is essential given that effective asset building programs must make a long-term commitment to the financial coaching model and to investing in training for new staff, as well as advanced coaching training skill development for experienced coaches. Ultimately, the agency may be required to examine its service delivery model to better serve goal-oriented clients who assume personal accountability in setting and achieving their own financial goals. 3 The assumptions of the financial coaching paradigm in Financial Coaching for Prosperity are supported by the International Coach Federation (ICF) 3

5 The Prosperity Agenda is currently implementing and evaluating a training for supervisors and program managers which engages the training participants in the following ways: identify the benefits of financial coaching for clients and the agencies, understand factors that influence the adoption and implementation of financial coaching in organizations, develop program and agencylevel goals to support financial coaching, and create agency-specific plans for ongoing staff development to sustain financial coaching. 2. Developing variations in financial coaching service delivery Studies have shown that financial coaching does not have a single model, but is being implemented using at least three different approaches, including a focus on specific events in a client s life or a financial task, or it may be of relatively long duration to support a client in making numerous behavior shifts and overcoming challenges. 4 Financial coaching, when implemented in different settings, has also been delivered as a low-cost employee benefit, as part of financial services for students, as a bundled service along with employment training, and as one of many family-focused services in what could be called an In-House Coaching Model. Three financial coaching examples from Washington State come from large multi-site human service agencies which include asset building programs among their arrays of services. Each of these variations of financial coaching relies on a case manager who is a financial coach, but in each of the three settings there are different supports available to the financial coach. Each agency has had existing employees complete The Prosperity Agenda s Financial Coaching for Prosperity training so these case managers/ financial coaches now offer financial coaching sessions blended with case management. Each of these agencies is providing a different service delivery model within a larger framework of offering clients financial coaching for the duration of their program services, most often transitional housing services. The models are referred to as a Blended Model incorporating financial education, a Step-Up Generalist and Specialist Model employing two levels of financial coaches, and a Continuum Model placing financial coaching with financial education and counseling. (See figures that follow this section). 4 Collins, J.M. & Murrell, K. (2010) Using a Financial Coaching Approach to Help Low-Income Families Achieve Economic Success: Challenges and Opportunities for the Field. University of Wisconsin-Madison and PolicyLab Consulting Group. 4

6 Blended model Hopelink integrated financial coaching in case management starting with an initial client assessment. During ongoing case management services, clients are referred to three financial education classes interspersed with financial coaching sessions. The combination of education and financial coaching is expected to assist families in their own paths to financial security. Financial Coaching Financial selfsufficiency assessment Financial Education: Asset Creation Financial Education: Asset management Financial Coaching Set financial goals, follow budget, develop a savings plan Financial Coaching Continue savings, short and long term savings goals, review credit report Financial Education: Asset Protection Step-Up Generalist & Specialist Model Solid Ground expanded its existing service which offered one-on-one financial education to assist clients to meet financial goals by having all housing case managers complete Financial Coaching for Prosperity training. The case managers are now generalists in coaching clients to set their own financial goals while also referring clients who seek in-depth financial barrier resolution to the Financial Boot Camp Coaching Specialist. Trained case managers include financial coaching in service delivery with all clients Clients seeking to resolve barriers and acquire more financial information are referred to the Financial Boot Camp/ Coaching Specialist Clients achieve asset creation through case management/ financial coaching services and/or the specialized Financial Boot Camp/ Coaching Specialist 5

7 Continuum model Neighborhood House offered financial education in group settings which has been enhanced by having case managers also implement financial coaching with the clients on their caseloads. In addition, two financial educators have completed coursework to begin offering focused financial counseling with clients who have completed coaching and who seek to meet savings goals and reduce financial barriers to their success. Financial education classes with different topics, varied schedules Case managers offer financial coaching for clients who often want to decrease expenses Financial counseling as part of a Financial Empowerment Center In each of these agencies which serve ethnically and linguistically diverse client populations, the staff members who are hired from the local community share their understanding of the norms and values of the clients cultures, which facilitates rapport building. The availability of full-time financial coaches who have retained the title of case managers maximizes that all clients who agree enter into a coaching relationship. This contributes to an agency-level practice philosophy that places the client as the person who is driving the actions to improve his or her goals for financial security. The potential exists to shift the agency culture to place accountability on the client as a resourceful individual and to reduce the position of a case manager as the decision maker who sets the client s course of action. 3. Applying behavior change theory to the practice of financial coaching To better understand how financial coaching empowers clients to change their behaviors, we should explore the theoretical framework for behavior change. Financial coaching is implicitly rooted in the Transtheoretical Model of Behavior Change (TTM) often referred to as the Stages of Change 5 which has been applied in numerous research settings to understand the readiness of individuals to make a health behavior change. The TTM identifies five stages of Precontemplation through Maintenance, and it describes that in order for individuals to move through the stages they need the confidence to know they can make changes. According to the TTM, the strategies that help clients to move from one stage to another include Consciousness Raising and Self-Reevaluation, which have a close correspondence to coaching approaches. The case managers/financial coaches have also described that some clients are less 5 Prochaska JO and DiClemente CC ( 1984 ) The Transtheoretical Approach: Towards a Systematic Eclectic Framework. Dow Jones Irwin, Homewood, IL, USA. Prochaska JO, DiClemente CC, Norcross JC (1992). In search of how people change. Applications to addictive behaviours. Am Psychol 47:

8 ready to take action, while other clients appear motivated to change, and these differences in readiness for action are supported by the Stages of Change model. Transtheoretical Model of Change relevant for understanding financial coaching 1. In the Precontemplation stage, individuals may be asked to think about changing a financial behavior, but they typically underestimate any advantages of changing behavior, defer taking any action, and do not engage in financial coaching. These clients who are resistant include those who have long histories of reliance on traditional case management, or clients who have cognitive impairments or behavioral issues such as mental health diagnoses or active addictions. If asked by a financial coach to identify a goal, a precontemplative client might be unable to make any future oriented statement. 2. In the Contemplation stage, individuals still do not engage in financial coaching and may be frozen with the pros and cons of making any change in their financial actions. The clients may listen to what a financial coach offers, but typically have set a prolonged timeline for themselves to wait before starting coaching or considering any change in behavior. A client in the contemplation stage who responds to a financial coach s powerful questions might identify a desire to pay down debt, but then list many obstacles to taking any actions for the next several years. 3. In the Preparation stage, participants are taking small steps such as deciding that they should make a change, like decreasing spending, but they are not yet taking action. Financial coaching client progress has often been described by the case managers as being incremental, with the clients identifying a goal and also identifying many sequential actions to reach the goal. Clients often need encouragement to get started on a step, such as talking to a landlord to resolve a problem with unpaid back rent. A financial coach may find that asking a client about his or her values starts a client setting action steps towards a goal. One of the financial coaching tools that is helpful to clients in the preparation stage is a financial wheel or a life wheel, where a client assigns a score of 1-10 based on his or her personal satisfaction with domains such as savings, expenses, job, housing, relationships, or legal issues. For example, when a client identifies he or she is most dissatisfied about accumulated debt, that can prompt a client to seek information to decrease spending and start paying down debt. 4. In the Action stage, participants are ready for coaching and for altering past behavior while also adopting new positive actions, such as making and keeping a budget, or starting a savings plan. Financial coaching succeeds in helping the clients identify what behaviors kept them from moving forward and replacing those behaviors with goal-related actions. 7

9 The case managers/financial coaches have used a variety of communication approaches and financial worksheets, such as monthly budgets, banking services comparisons, short-term and long-term goal setting, or prioritizing paying down debts. In interacting with clients, the coaches communication typically occurs in several areas: Setting a budget, tracking expenses, brainstorming reducing expenses, setting financial goals Offering information and encouraging the client to research banking services including low-cost accounts, setting short and long term savings goals Explaining costs of credit cards, options for reducing debt, avoiding predatory lending services The majority of clients who have engaged in financial coaching have made progress in meeting their goals such as: starting a checking or savings account, reducing use of payday lenders, cutting expenses through setting and following a budget, or decreasing the use of credit cards in order to reduce debt. 5. In the Maintenance Stage, financial coaching could support the client in asset management and protection as well as sustaining positive financial behaviors such as saving, not using predatory services, and using credit wisely. Financial coaching could further develop this Maintenance stage by using approaches to ensure that the client continues in new positive financial habits, as well as assisting clients in identifying attainable incentives and rewards for continuing their positive behaviors. For example, financial coaches and clients might discuss means of protecting assets leading clients to explore buying insurance. PRECONTEMPLATION CONTEMPLATION PREPARATION ACTION MAINTENANCE 8

10 4. Future actions that will advance financial coaching practice The focus has been on the financial coaches preparation, how the coaches are practicing financial coaching, and the clients behavior change. The focus now turns to the results of financial coaching as evident in the clients outcomes. Acknowledging that financial coaching is a client-driven approach which provides tailored communication for each individual, and the related results are often unique to the individual, financial coaches typically refer to their work as being hard to evaluate. Recent findings from the Financial Coaching Outcomes Measures Project has moved the field closer to the use of common measures but there is not yet agreement or widespread application. 6 The Prosperity Agenda is presently conducting an evaluation of financial coaching clients outcomes. The future evaluation will describe clients goals, the time and action steps required to meet goals, and changes in savings, income, education, or employment. The evaluation will compare the results of clients who have received at least six months of financial coaching to the financial outcomes of clients who received services at agencies where case managers had not completed Financial Coaching for Prosperity training. The results of the client outcome evaluation are expected in 2014 and will be the focus of a future issue brief. The Prosperity Agenda has learned in evaluations of the Financial Coaching for Prosperity training that the implementation of financial coaching and the related client outcomes are influenced by the agencylevel and program-level contexts. The client level outcome evaluation data are being analyzed with attention to the influence of the agency settings, including agency mission or values, on the financial coaches interactions. The evaluation will also describe the clients outcomes relative to these features, which are common in the agencies that are adopting and blending financial coaching and financial empowerment into their service delivery: 6 Collins, J.M., & O Rourke, C. (2013) Finding a Yardstick: Field Testing Outcome Measures for Community based Financial Coaching and Capability Programs. Accessed online: 07/Report_Final.pdf 9

11 Conditions present in settings which are endorsing financial coaching 7 1. Visible support from organizational leadership at the supervisory and management levels 2. Clarity about the organization s goals for implementing financial coaching as an innovative approach 3. Adequate resources for implementing financial coaching which include staff time 4. Adequate training regarding the use of financial coaching and financial empowermenttraining for frontline staff, supervisory staff, managers, and directors. 5. Access to additional technical assistance that will further the use of financial coaching 6. Opportunities to respond to the case managers questions or concerns about the use of financial coaching In the future, The Prosperity Agenda will conduct additional evaluations which will involve partnerships with the agencies where the case managers have completed the Financial Coaching for Prosperity training and the supervisors have completed the training for agency supervisors. The Prosperity Agenda will be evaluating these elements which have been developed and are expected to be evident in agencies following the trainings: Performance monitoring systems to evaluate the implementation of financial coaching Professional development plans for financial coaches in agency and organization service delivery models The results of future client-level and agency-focused evaluations will contribute to the practice of financial coaching and to further development of financial coaching service delivery models. 7 Panzano, P.C.,Roth,D., Crane-Ross,D., Massatti,R., Carstens,C.,SeffrinB. (2005) The innovation diffusion and adoption research project (IDARP): Moving from the diffusion of research results to promoting the adoption of evidence-based innovations in the Ohio Mental Health System In D. Roth & W.J. Lutz (Eds.) New Research in Mental Health (vol. 16,pp 78-89). Columbus,OH: Ohio Department of Mental Health. 10